“Overdraft Protection”. Protection, really?
So, where does good marketing end and deception begin? Or do we need yet another piece of regulation to prevent banks from harming their own customers, this time calling it “protection”?
There has been a constant barrage of letters from banks I use asking me to opt into this program since after Financial Reform Bill of 2010 they can no longer simply charge you a $35 overdraft fee when you accidentally spend $2 more than you have in your account on a cup of coffee. You now have to specifically allow your bank to rob you and the bank would prefer to call it “protection”. Well, “overdraft protection” sounds a whole lot better than “robbing authorization”, doesn’t it? Some of these ads (umm.. sorry, opt-in letters, that’s what they call them) are outright disgusting. Read further for examples
I am especially appalled by this language used in letters that the banks send to my teenage and young adult children, touting special student bank accounts with overdraft protection. Recently I even saw the university that my son attends (and which I’m paying upwards of $30,000/yr for) put their name and their logo on one of those offers by the bank that dominates their campus.
For one thing can they not see that young people, saddled with tuition bills, no constant source of income and little experience in financial matters would the constantly teetering on the edge of over-drafting their accounts? And how better can a bank serve their young clients (if client well-being were ever considered) than to prevent them from over-drafting the account rather than mislead them into thinking they have just a little bit more in their account and then slap them with a hefty fee, and slap it each time they make the smallest of the purchases.
If you don’t have a kid in a higher learning institution now, you just have to know that hard cash has very little use on modern university campuses and all, even the very small less than $1 transactions, are handled by cards. Does $35 fee on a $1 transaction not sound robbery to you? Does it to your bank?
So, what’s this “overdraft protection” deal all about? At a risk of stating the obvious I have to explain the term in case someone reading this hasn’t been hit with this con yet. Say, you have $100 left in your account. Yes, you are cutting it close, don’t most people? You need to fill up the gas at, say $30. Unbeknown to you one of the transactions you’ve made recently for $80 was actually a credit transaction that has not yet posted to your account by the time you last looked at your online statement. And yet by the time you pull up to the gas station, the transaction comes through (they can come through any time day or night but your account statement only updates once a day) and you now only have $20 in your account. So, instead of denying your $30 gas transaction (forcing you to use cash or another card – another bank’s profit, you see?), they let the transaction go through (you are at negative $10) and slap you with $35 over-draft fee (you are now at negative $45).
But that isn’t it! Since there is no “hard stop” on your account, you’re mislead into thinking you still have a couple of bucks in your account and go buy yourself a cup of your favorite caffeinated beverage for $2. Once again, instead of stopping you, they let it go through. That’s another transaction on an already over-draft account and you get slapped with another $35 fee. You’re still counting? You’re at negative $82 and the day hasn’t even started yet!
Now, from what I read in those “opt-in letters” banks call it “over-draft protection” because they claim that they protect you from the embarrassment of a denied transaction. It’s as if unknowingly throwing out $35 is not a bigger embarrassment.
Can somebody please tell me if this “over-draft protection” serves a single useful purpose in real lives of actual bank customers? I’m out of ideas, can’t come up with a single example of when you would in your right mind prefer to continue the transaction even knowing that there will not only be a hefty fee but then each and every transaction that happens after that (and before you rush to the bank, deposit money AND wait until they post to your account) will have a $35 tacked onto it, regardless of the transaction amount.
Oh, there is another facet to this story. If you, like me, cannot see how this malpractice was allowed in the first place, check how your elected official voted on the law that at the very least requires the banks to ask whether you allow to be robbed.
Yeah, banks have free coffee brewing in the lobbies and the environment looks serene. but don’t get yourself lulled into a false sense of security. It’s a dangerous world out there, always be on lookout and stay safe!